Friday, April 11, 2008

The answer 42. Seriously, it's not that easy; and who's counting anyway? Over the past week or so, I've compiled a number of articles addressing CO2 emissions and the problems associated with tracking them, trading them, verifying them, and reducing them. An issue that appears to be overlooked is the time delay associated with some of the offsets one buys to go "carbon neutral". This article from ClimateBiz, The Benefits and Drawbacks of Carbon Offsets sheds some light on this topic as well as the issue of additionality. I've included a brief excerpt [emphasis added]:

However, when you buy 20 tons of offsets, there will not be an immediate, 20-ton reduction in greenhouse gases. For a renewable energy project with an expected life of 20 years, the 20 tons of carbon savings would typically be spread over the life of the project -- meaning that the carbon reduction would be 1 ton per year over 20 years. Moreover, the reduction doesn't start until the project is completed, which could be a year or more after your purchase.

If the funds are used to plant trees, your purchase doesn't reduce greenhouse gases immediately because the amount of carbon that trees absorb is directly related to their size. Small saplings have little effect on greenhouse gases; the effect grows as the tree does. If you buy 20 tons of offsets that go toward a tree-planting project, it's possible that atmospheric carbon would fall by less than 5 tons in the first 25 years of the trees' lives.

As the market for offsets/CERs evolves, perhaps there will be a time factor integrated into the regulatory regime to help us manage the delay; we really want to start reducing emissions NOW, not 10-20 years from now.

But as the details of the plan have emerged, environmental groups and politicians — who applaud Norway’s impulse — say the feat relies too heavily on sleight-of-hand accounting and huge donations to environmental projects abroad, rather than meaningful emissions reductions.

Time Magazine added to the confusion in the clean energy debate with this wonderful story. Yes, there are clearly some issues with biofuels (more energy in than you get out, depending on the feedstock, using cropland to grow fuel instead of fuel, the need to create more farmland to “grow” the fuel) that this article addresses, but the headline, The Clean Energy Scam, is misleading. The article does not talk about clean energy overall, only biofuels. The title of the article should have been, “The BioFuel Scam”.

Financial Times article, Fog lifts to reveal carbon trading, brings the new breed of entrepreneurs into the fray, people looking to make a living by matching buyers and sellers of CO2. Again, a snippet:

But most carbon traders remain optimistic about the future, pointing out that teething problems are to be expected in such a young market, and that the market itself is based on a strong fundamental – the need to tackle climate change.

James Cameron, vice chairman of Climate Change Capital, says: “Entrepreneurs like risk, because risk is opportunity, so you should not complain about risk. We are still very strong believers in the carbon market.”

Climate Change Risks from the Financial Times digs into a little bit of a recent report issues by KPMG seeking to highlight the risks associated with climate change. The folks at KPMG are clearly trying to sell their consulting services, but they do raise some good points that businesses seem to think they can “win” in a carbon constrained world while underestimating the risks they face. Here’s a small chunk from the FT article [emphasis added]:

Such analysis is problematic. Irrespective of one's view on climate change, very long-term risk assessment is anathema to most companies, as KPMG acknowledges. Management incentive plans, not to mention the time horizons of even the most conservative institutional investors, are unable to confront risks beyond a few years. Even if they could, computer models or highly paid futurists cannot forecast outcomes with the accuracy needed to generate a measurable economic return.

Luckily for us, Ted Turner is on the case, and lending a scientific and rational voice to the debate (hard to gauge sarcasm). At least he's passionate.